Monday, 26 January 2009

bailout fatigue

Alistair Darling has accepted that a second emergency package of tax and spending measures may be needed in this spring's budget to claw the economy out of a deepening recession, the Guardian has learned. Despite the deterioration in the public finances, the chancellor is willing if necessary to borrow more money to help strategically important industries and to help lay the foundations for economic recovery. He will start work this week on plans for a British answer to Barack Obama's green jobs agenda.

The Guardian say that the new package will "Lay the foundations for economic recovery" I call it building up a massive mountain of public sector debt.

In a move which will again highlight the problems with EU regulations and laws, it has been revealed that the UK may well be forced to assist with the bailout of EU member countries who have taken the euro as their currency. Despite the fact that the UK has not yet joined the euro there appears to be small print in the European Union treaty which allows EU regulators to force EU members to contribute to any potential bailout.

When you consider that countries such as Ireland, Spain and Greece are in serious financial difficulties at the moment there is every chance that the UK government could be asked to "chip in" with substantial funding figures. Whether this luxury would be afforded to the UK if the economy continues to fall is unclear but this news will blow apart the Labour government's claim that the European Union treaty is not detrimental to the UK taxpayer.

As yet there has been no call for EU members to contribute to a bailout fund but with the situation worsening across Europe, and money tighter than ever, many expect plans to be put into action over the coming months. Quite how much the UK might be asked to contribute is a little unclear at this moment in time but interestingly, even though the UK has regularly used its veto for the good of the country, there are no vetoes available for this potential EU rescue funding requirement.